Australian shares are expected to slip from their record highs at Monday's open, as market participants look towards the Reserve Bank of Australia (RBA) interest rate decision on Tuesday, amid expectations that policymakers may delay a potential interest rate cut until next year, even as other global central banks move towards more accommodative policies.
Futures suggest the S&P/ASX 200 will open 0.8% lower, shedding 68 points, following its record close of 8209.5 on Friday. Optimism surrounding the U.S. Federal Reserve's bold 50 basis point rate cut, which raised hopes for a soft landing in the world’s largest economy, helped fuel recent gains.
Despite the initial rally, U.S. stocks ended the week on a subdued note. The S&P 500 and Nasdaq 100 both closed 0.2% lower on Friday, while the Dow Jones Industrial Average eked out a 0.1% gain, marking another closing record.
This week, investors will be closely watching the RBA's meeting on Tuesday, where the central bank is widely expected to keep the cash rate steady at 4.35%.
Meanwhile, the release of the August inflation indicator on Wednesday is expected to show annual inflation easing to 2.7%, down from 3.5% in July. If confirmed, it would be the first time inflation has fallen within the RBA’s target range of 2% to 3% since October 2021.
In the commodities sector, gold touched a record high of $2,625.59 per ounce, while oil prices dipped slightly on Friday but ended the week more than 4% higher due to escalating tensions in the Middle East.
Iron ore prices saw a slight uptick but finished the week with losses as traders balanced China’s potential monetary stimulus with the country’s sluggish economic recovery.
The Australian dollar remained strong at US68¢, having risen 1.5% last week, driven by favorable interest rate differentials between the U.S. and Australia.
On the bond markets, Australian government yields mirrored US Treasuries, with the 2-year yield at 3.61% and the 10-year yield at 3.966%.